American Barrick's Business Case: American Barrick Resources Corporation

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American Barrick Resources Corporation was one of the largest and most successful mining company in North America. Risk management against the price of gold was central to the American Barrick’s business strategy. It was among one of their four stated business objectives. The case here talks about American Barrick’s hedging strategy, how they made use of different hedging strategies and also comparison of American Barrick’s hedging strategy with its competitor has been made. It talks about how the company made use of different hedging instruments like options, forward contracts and spot deferred contracts to manage price risk. It explains the concept of hedging and its use in American Barrick in detail. The hedging program was very important deal for American Barrick because it helped them earn profits amidst falling gold prices. As for example, in 1992 market price of gold was $345 per ounce, however American Barrick was able to sell it at $422 per ounce, much higher than the prevailing market price.
It says hedging is basically reducing exposure to something that can be risky to the firm or organisation. Hedging is done mainly and majorly to transfer risk and limit the risk exposure of the concerned person or organisation. Gold hedging that is talked about in this case is a
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Most of the American Barrick’s growth came from annual acquisitions, and their good luck. Due to their good fortune all the mines they acquired were rich in Gold. So as a result they earned huge profits as a result of their good fortune. A number of others sources were also responsible for its rising profitability. One of the reasons was that American Barrick acquired the mines at low prices when there was depression, as a result they were able to enjoy economies of scale. Other major advantage to American Barrick was that it was able to profits from its gold management program which others could

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